Zero Commission a Challenge to One-third of Travel Agencies

Amadeus recently published the results of its independent study on travel agent commissions and used the results to provide valuable insight to tour operators worldwide and maximize service fee revenue.

The white paper entitled “Service Fees and Commission Cuts: Opportunities and Best Practices for Travel Agencies” outlines the history of the demise of airline commissions, which have fallen steadily from around ten percent of the ticket price in the mid-1990’s to zero in many markets today.

The report revealed the results of the Amadeus study that found 34 percent of travel agents feel reduced revenue commission is their number one challenge. In Western Europe, lost commission revenue is the main concern of over half of all travel agents.

The second half of the paper outlines the experience drawn from markets that have successfully implemented service fee models to compensate for the loss in revenue. In such cases, travel agencies adopt a service fee model whereby they charge the customer for the services provided instead of commission from the travel supplier. The most successful markets have seen their revenue grow even as commission has fallen. Scandinavia and the United States are good examples of this model.

The report offers tips to travel agencies on how to implement this strategy such as formal training programs on service fee schemes for their staff. Amadeus also suggests an up-front customer approach to the service fee scheme as its results indicate a customer is willing to pay for a service they see value in.

This method predisposes the identification of services for which customers see the highest value and would pay for, such as trip planning, hotel booking and frequent flyer reservations. The global technology partner also stressed the need for automate processes when fees are charged to avoid errors and increase travel agent efficiency and productivity.

Claude Giafferri, vice-president of travel office products and solutions at Amadeus, said: “As a global technology partner to the travel industry we feel we can add value by sharing our experience of markets and travel agencies which have successfully implemented new business models to help those who have yet to go through that transition. That is what we hope to achieve with this white paper.”